For the second week running, the average mortgage rate in the United States fell, according to the latest survey from Freddie Mac.
The benchmark U.S. 30-year fixed-rate mortgage fell to 6.69% from the previous week’s reading of 6.81%. This marks the lowest rate since October.
Home purchase applications rose a seasonally adjusted 5.6%, hitting their highest level in 2024. In just the past two weeks, applications surged 18%, something that is not uncommon around year-end holidays. Still, the jump suggests prospective buyers may be deciding to enter the market with rates easing.
Last year, the 30-year fixed rate was 7.03%, which is only 0.34 percentage points higher than it is currently, despite the Federal Reserve having implemented two rate cuts totaling 0.75 percentage points in recent months.
In November, The Dallas Express reported that households across the United States are struggling with mounting debt. During the year’s third quarter, total household debt increased 0.8% from the previous quarter to a record high of $17.94 trillion.
Higher debt is partly driven by higher borrowing rates charged by financial institutions. These rates are influenced by Fed policy. As the Fed lowers or raises the Fed Funds Rates, financial institutions tend to follow directionally.
Today, the Federal Funds Rate stands at 4.75%, though the Fed is expected to lower rates another 25 bps at their December 18 meeting. This means many potential borrowers may still await a further anticipated drop. Sellers, too, might wait to list properties if they think demand will rise in a market where homebuyers qualify for larger loans.
According to Zillow, around four out of five mortgage holders currently have a rate under 5%.
“This week, mortgage rates decreased to their lowest level in over a month. Despite just a modest drop in rates, consumers clearly have responded as purchase demand has noticeably improved. The responsiveness of prospective homebuyers to even small changes in rates illustrates that affordability headwinds persist,” said Freddie Mac’s chief economist, Sam Khater, per Fox Business.